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Is First Trust Small Cap Value AlphaDEX ETF (FYT) a Strong ETF Right Now?
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Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Value AlphaDEX ETF (FYT - Free Report) provides investors broad exposure to the Style Box - Small Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $241.18 million, making it one of the average sized ETFs in the Style Box - Small Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Value Index.
The NASDAQ AlphaDEX Small Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Value Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.71%.
The fund has a 12-month trailing dividend yield of 1.22%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FYT's heaviest allocation is in the Financials sector, which is about 30.80% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Renewable Energy Group, Inc. accounts for about 0.93% of the fund's total assets, followed by Cornerstone Building Brands Inc. and Transocean Ltd. (RIG - Free Report) .
FYT's top 10 holdings account for about 7.92% of its total assets under management.
Performance and Risk
So far this year, FYT has lost about -8.07%, and is down about -5.52% in the last one year (as of 06/01/2022). During this past 52-week period, the fund has traded between $46.13 and $54.42.
The ETF has a beta of 1.39 and standard deviation of 35.74% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Value ETF (IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $12.68 billion in assets, Vanguard SmallCap Value ETF has $25.04 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is First Trust Small Cap Value AlphaDEX ETF (FYT) a Strong ETF Right Now?
Making its debut on 04/19/2011, smart beta exchange traded fund First Trust Small Cap Value AlphaDEX ETF (FYT - Free Report) provides investors broad exposure to the Style Box - Small Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $241.18 million, making it one of the average sized ETFs in the Style Box - Small Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq AlphaDEX Small Cap Value Index.
The NASDAQ AlphaDEX Small Cap Value Index is an enhanced index which employs the AlphaDEX stock selection methodology to select stocks from the NASDAQ US 700 Small Cap Value Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.71%.
The fund has a 12-month trailing dividend yield of 1.22%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FYT's heaviest allocation is in the Financials sector, which is about 30.80% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Renewable Energy Group, Inc. accounts for about 0.93% of the fund's total assets, followed by Cornerstone Building Brands Inc. and Transocean Ltd. (RIG - Free Report) .
FYT's top 10 holdings account for about 7.92% of its total assets under management.
Performance and Risk
So far this year, FYT has lost about -8.07%, and is down about -5.52% in the last one year (as of 06/01/2022). During this past 52-week period, the fund has traded between $46.13 and $54.42.
The ETF has a beta of 1.39 and standard deviation of 35.74% for the trailing three-year period, making it a high risk choice in the space. With about 263 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Small Cap Value AlphaDEX ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Value ETF (IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $12.68 billion in assets, Vanguard SmallCap Value ETF has $25.04 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.